You are here:

Crowdfunding public services: big opportunity, big challenge

Crowdfunding used to be about getting funding for that cool iPad accessory or album from an up and coming artist. However, as the crowdfunding market grows, platforms and entrepreneurs are increasingly exploring how to use the model in other areas, one of which is the crowdfunding of public services.

This type of crowdfunding of community projects that are for the public good is often referred to as civic crowdfunding.Early examples of it in action include the Luchstingel Bridge in Rotterdam and the Glynoch Community Center in Wales where projects with a public service dimension were (partly) funded by the crowd. Building on this, crowdfunding platforms have been emerging that aim to service demand in this area, such as UK based Spacehive or US based Citizinvestor who focus on launching projects for the public good.

While it is always interesting to observe the crowdfunding model evolve and develop potential opportunities in new areas, it's important to note that crowdfunding projects for the public good also brings with it a set of potential challenges. Below, we list three of each.

Three opportunities: Using crowdfunding to increase public engagement in projects by demonstrating demand

Could it help increase the total amount of money committed to projects that have a public benefit? The opportunity crowdfunding creates to mobilise people (and their small donations), has the opportunity to grow the overall amount of funding available to entrepreneurs interested in doing a project that benefits the public.

Could it increase democratisation and diversity of what gets funded? Similar to crowdfunding for other types of projects, civic crowdfunding can be a method for identifying real demand from users, and create a vehicle for local people to actively take part in deciding what local public good projects should be initiated. Similarly, unsuccessful campaigns can be a good indication of what projects hold little value to people. Building on this, the opportunity to pitch ideas to the crowd could also help increase the diversity and potential for innovation in public projects. Few commissioners would probably have thoughts of the idea to build a London 'LidoLine' which would allow commuters to swim to work along Regents Canal in East London. It didn't get funding, but nonetheless crowdfunding created a platform for the idea to get pitched and tested relatively cheaply.

Could it create opportunities for public funders to match local demand with public funding? In addition to communities funding public good projects on their own, the demonstration of local interest in a public service through crowdfunded contributions, provides valuable insight for commissioners and other funders of which projects they should consider investing in or match-funding (we will be writing more about the potential for match-funding in a blog next week, so watch this space).

Three challenges - Ensuring crowdfunded projects can be sustained once the campaign finishes and that what's funded delivers value for all segments of society.

Would there be a risk of encroachment on what should be publicly funded? Instead of adding to the total pool of resources available to fund projects for the public good, civic crowdfunding risks encouraging traditional public service funders to withdraw from funding services that should be paid for by the taxpayer. This is particularly important as while some areas may have populations wealthy and engaged enough to provide what the public service provider will not, other areas will not and disadvantaged areas will suffer most. For example, you could imagine that it would be much more likely that a crowdfunded footbridge across a highway gets built where there is an affluent neighbourhood rather than in a poorer area and so on.

Would it ensure that the development of public resources reflects the needs of the entire community? In situations where there are competing uses of a public resource, crowdfunding the development of the resource may not always be a fair option that delivers the most value to the community. As pointed out, earlier communities that are wealthier and more adept at running successful crowdfunding campaigns will benefit most but this is also true for groups within individual communities. Just because one subset of a local community is crowdfunding savvy, and has an idea, such as transforming a piece of derelict land in to a playground, that doesn't necessarily mean that is the right usage of the land. Other uses such as a garden or community centre might generate more value for the community but those that would benefit may not have the skills or wealth to make it happen. In these cases it is important to consider the balance between ensuring what gets developed provides value and trying to get something done rather than nothing.

Would it work for services as well as products? Crowdfunding traditionally works really well for one-off campaigns, such as watches and videogames where entrepreneurs are aiming to go on to develop a private enterprise afterwards. When they seek further funds to finance their future development they can turn to internal revenues of other external sources such as banks. However this is somewhat different when thinking of the crowdfunding of public goods. Most public good projects, such as playgrounds, are services rather than products, that need to be maintained long after the crowdfunding has finished. The challenge will be to keep the crowd engaged beyond short funding windows to fund the ongoing maintenance of services or to get traditional public service funders to take on the baton.

It will be interesting to see how civic crowdfunding evolves as a model over the next couple of years, and it is something we are interested in learning more about here at Nesta. So if you hear of great examples of civic crowdfunding platforms, projects or studies of civic crowdfunding that you think we should look at. Please get in touch.

Sign up to our weekly newsletter

Nesta is a registered charity in England and Wales 1144091 and Scotland SC042833. Our main address is 58 Victoria Embankment, London, EC4Y 0DS. You can reach us by phone on 020 7438 2500 or drop us a line at [email protected].